Taxes-Country by Country

There will be a lot of debate in the next few years over taxes.  Some tax cuts expire in 2010, I think, and two--the 15% tax on capital gains and 15% tax on dividends-- have been extended for at least two years.  People get all exercised about taxes with the fat cats not paying their share (actually 5% of the taxpayers pay about 50% of the taxes) or somebody yelling about taxes killing them.

So when things get complicated, I go looking for simplicity.  And found it.  I have long held the premise that the higher the tax rate, the lower the productivity.  And I am right--nine times out of ten.  Forbes (another unabashed commercial for the best business magazine) has compiled the Tax Misery and Reform Index.  Basically, it takes a countries various tax rates and adds them up.  The components are:

-Corporate Income Tax

-Personal Income Tax

-Wealth Tax

-Employer Social Security

-Employee Social Security

-Value Added Tax or Sales Tax

Obviously, the higher the number, the higher the misery index.  And the winner is FRANCE with a misery index of 166.8.  Rounding out the top ten are:

Belgium

Sweden

Italy

Spain

Argentina

Greece

Germany

Brazil

Not exactly economic powerhouses.  There is one surprise as the list above totals only to nine.  The country that is actually Number 2 in the Misery Index is, and this is a total surprise, is China.  Forbes says China is up there because 'of its extraordinry social security and pension rates.'  I don't want to appear too cynical but China may have high rates but, in reality, nobody pays them.  Just a guess.  But the bottom line is that the countries with the highest tax rates are pretty much economic basket cases.  One could argue about Sweden and, while certainly not a basket case, it is not an economic powerhouse.

So if the top ten in taxes are not economic powerhouses, one would think the bottom ten would be and so let's take a look.

The top ten, with number 1 having the lowest misery index, and then so on are:

-United Arab Emirates

-Hong Kong

-Singapore

-Russia

-Taiwan

-South Africa

-Indonesia

-India

-USA (Texas)

-South Korea

Some pretty good economies and some with real potential like Indonesia, South Africa and Russia.  Direct links between taxes and growth are difficult because there are a lot of other variables.  But as one of my bosses put it, if the numbers go your way, use them. 

And I will.  Lower taxes make for stronger economies. 

And one final note.  Please note that USA (Texas) is number 9 in lower taxes.  USA (New York) was number 13 in higher taxes.  Which means if you live in New York and want to lower your taxes, move.  Welcome to the Lone Star State.

Comments

[Finance]

Some countries impose high taxes as they want to redistribute income among citizens.

[Lisa P]

The people have pointed America’s next President of the United States. “Change” is what the U.S. has chosen by electing Barack Obama. There is no doubt that change is in store for us. Whether this change is for the better or for the worse is yet to be seen. It’s obvious that Americans believe Obama will bring a positive change to our country. He spoke promising words to restore confidence in the hearts of the unsure with plans to lower taxes for the middle class, put a timeline on the war in Iraq, and cut the federal budget “line by line.” However, what many Americans fail to realize is the fact that Obama also supports the elimination of payday lending industries. He thinks demolishing the payday loan industry will protect low-income families from being victimized by predatory lenders. However, this will be a threat to our financial freedom. Maybe Obama will bring positive change to the United States, but taking away one of the most reliable resource many people have come to depend on during financial fallbacks is not only a risk to our rights to financial freedom, but it is clearly NOT a great start to create the positive change we all desperately need.
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[Payday Loan Advocate]

The people have pointed America’s next President of the United States. “Change” is what the U.S. has chosen by electing Barack Obama. There is no doubt that change is in store for us. Whether this change is for the better or for the worse is yet to be seen. It’s obvious that Americans believe Obama will bring a positive change to our country. He spoke promising words to restore confidence in the hearts of the unsure with plans to lower taxes for the middle class, put a timeline on the war in Iraq, and cut the federal budget “line by line.” However, what many Americans fail to realize is the fact that Obama also supports the elimination of payday lending industries. He thinks demolishing the payday loan industry will protect low-income families from being victimized by predatory lenders. However, this will be a threat to our financial freedom. Maybe Obama will bring positive change to the United States, but taking away one of the most reliable resource many people have come to depend on during financial fallbacks is not only a risk to our rights to financial freedom, but it is clearly NOT a great start to create the positive change we all desperately need.
Click to read more on Payday Loans

[English Major]

Where does a country's quality-of-life standard enter the calculations?

[S. Carvalho]

Hey I grew up in the UAE! 85% of their population is non-citizens, so taking care of 15% of your population with all that oil/trade money is pretty easy. As for the rest of the population, especially the huge numbers of labourers, construction workers and housemaids, the misery index is way off the charts.